Intellectual Property Valuation-IP Valuation

Intellectual Property Valuation-IP Valuation

A wise man will always allow a fool to rob him of ideas without yelling "Thief." This line very well defines the IPV, i.e., Intellectual Property Valuation. Intellectual property and Goodwill (which are the intangible assets carry their role during the process of dealings regarding the sale and purchase of any organization. It is one of the important parts of any business, but, unluckily, it doesn't exist in any physical or cashable form. If you are thinking of removing this part from your business, then it can become the reason for the backlog of the business, and you won't be able to come with the true worth of your work even though it doesn't have a fixed form and shape but has very high importance in the assessing of original value of the industry. So, from this, it can be clearly concluded that this is directly responsible for finding the actual placement of the business to make a profit and grow in the industry world.

What exactly does the term IPR Valuation mean?

IPR stands for Intellectual Property Rights. Now, IPR Valuation is the main part of the finance area of any business. It is all related to deals regarding the price for selling and purchasing of companies. It comes into work during the merger, acquisition, solvency transactions, and all other finance areas. Now, Intellectual property is that assets can be either patented or can be even patentable process, product, trademark, service, brand, or copyright. It is always a different and unique creation for every organization which decides its originality in the industry. It can be the reason for the success of your organization or can even be the only reason behind the collapse of your organization. 

It basically means to arrive at a correct and actual value of the Intellectual Property of any Company. Further, to make the profit out of the company's price, it is very important to decide and put forward such a rate of the company that you stand with enough profit for your company at the end. Now, Intellectual Property Rights Valuation is the process that helps you to achieve a justifiable profit from the selling price.

What is the need for an IPR Valuation firm?

Since Intellectual property rights don't have a physical or cashable form, still why do we need it? The reasons behind this are as follows:

  • It is a crucial part of deciding the company's sales, transfers, profits, or licensing prices.
  • Intellectual Property assets are a type of non-physical property that a company owns; therefore, they have legal protection, which can be enforced in a court of law.
  • IP assets can be recognized independently, are transferable, and have a monetary value.
  • It is needed at the time of transactions such as mergers and acquisitions.
  • IPR Valuation is a kind of expert area behind the business, and therefore it decides in helping the actual value of any company. 

It does have the risk of wasted investment, but firms very often invest too much in Intellectual property. But this risk-taking is very negligible in front of profit through IPR Valuation. 

Many companies in India are awesome examples that effectively understood this crucial part of the business by finely examining the importance of properties related to intellectual rights.

Benefits and Methods of Intellectual Property Valuation

The Advantages of IPR Valuation are:

  • Intellectual Property valuation aims to use appropriate and trustworthy industry information and market forecasts to determine future sales.
  • Intellectual property valuation is useful in a variety of situations.
  • Calculating the price of a trademark, patent, or copyright streamlines the process of licensing and aids in setting suitable original rates for third-party's applications of intellectual property assets. 
  • The economic benefits of intellectual property shielding are numerous.
  • It stimulates the process, distributing the most up-to-date awareness regarding technologies, recent innovations, all latest research, and upcoming developments, creating new businesses, economic advantages from locations, and lowering trade transaction costs.
  • The future economic benefits to the IP owner or authorized user are represented by the value of an IP asset.
  • The IP is directly exploited by incorporating it into the product.
  • The IP is sold or licensed to a third party.
  • They are increasing entrance barriers or lowering the danger of substitutes.

Intellectual property is often one of a company's most valuable assets, and maximizing its value could be an essential component of any business transaction. The value of tangible assets like databases, trademarks, patents, logos, and secrets behind the trade is frequently assessed using a variety of approaches.

Methods of IPR Valuation

IPR is a very complicated process because it determines the true value of your business. Since IPR doesn't have any shape, it is difficult to provide justice towards the value. But to resolve this major issue, we have some methods of IPR Valuation, which are as follows:

  • Market Method: Market behavior is used as the base to determine the value of the IP for a company in this method. Basically, one comparable transaction is used to influence the IP valuation of another transaction about the price paid for the transfer of IP rights. 
  • Cost method: In this valuation process, the cost of a similar IP asset is enumerated to determine the value of an IP. When an IP asset comes into question that can be easily replicated, but its economic benefits are difficult to quantify, this method comes in helpful.
  • The income method is the most prevalent method for valuing intellectual property. The assessment is made in this method based on the predicted economic income vs the current market value. This strategy is popular in situations when IP assets have promising cash flows, and future estimates may be formed based on prior cash flow.

What makes intangible assets so important to a company?

  • Patent registration prevents competitors from releasing comparable, competitive items, potentially forcing the company out of the market.
  • Having exclusive rights to a product design allows a company to establish a one-of-a-kind offering for its target market and price its items accordingly.
  • The company's reputation as a forward-thinking company is enhanced.
  • The IP license, which is used by third parties to produce and sell their product(s), is a substantial and valuable revenue stream for design-only enterprises.
  • Holding assets can increase revenue or lower costs, and if they provide revenue for the business being sold, a different variety of valuation methods will be used.
  • However, there is no single technique of valuation that is acceptable for every business sale; the most appropriate method is determined by a number of factors, including whether the intellectual property rights (IPR) are fully formed and functional.

Conclusion:

Value from an IP asset is derived thru direct exploitation like sale and licensing of the IP or maybe with the aid of using now no longer exploiting an IP asset (i.e., with the aid of using simply proudly owning it), for example, with the aid of using minimizing the negotiating electricity of customers, offsetting dealer electricity, mitigating rivalry, elevating obstacles to access with the aid of using competitors, decreasing the risk of substitutes, etc. Evaluation of IP may be a difficult process. The most appropriate approach for IP belongings relies on the motive to be derived from the result, belongings subjected to valuation, and the particular phase for which the valuation is prepared.

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